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The perils of investing with your politics James Saft


In investing, it seems, the wages of following your political bias is higher volatility without higher returns. That’s the upshot of a new study, which tracks how heavily fund managers allocate assets into firms managed by people with whom they agree politically. (here)Fund managers do tend to opt for firms with which they are in political alignment, the study finds, and do so more when their own party controls the White House. As more risk without more reward is the investing opposite of a free lunch, this extra volatility politically biased mutual fund managers create is a cost and a problem for fund holders. As the Trump rally seemingly falters, now may be a good time to consider some of the factors which may have undergirded the surge in stocks on his election. The new study, by M. Babajide Wintoki and Yaoyi Xi of the University of Kansas, looked at a sample of 1,298 mutual fund managers between 2000 and 2015, using political donations as a proxy by which to see if they invested more or less in firms managed by executives with similar political views. The answer, perhaps unsurprisingly, was yes. Republican-leaning managers put about 8 percent more into Republican-leaning firms than do Democratic-leaning managers, the study found. Those same Republican-leaning managers also put about 3 percent less into Democratic-leaning firms than do their Democratic-supporting peers. Funds whose managers have an identifiable political leaning hold 43 percent of assets in firms whose management align with their bias and only 33 percent in firms whose managers lean the other way.

So, people put their, or their clients’, money where their political beliefs are. How’s that working out?“We find that mutual funds that have more holdings in politically similar firms tend to perform worse than those with less partisan bias, although the economic magnitude of this underperformance is small. However, we find that partisan bias actually leads to statistically and economically significantly higher levels of fund idiosyncratic volatility,” the authors write. For every one standard deviation increase in partisan holdings funds suffer about a 29 percent increase in idiosyncratic volatility. Love Trump or hate him, love Hillary or want her jailed, that is not what fund managers are paid to do. FAMILIARITY OR ADMIRATION/CONTEMPT

This result lines up well with some other recent research into the impact of political bias on investing. A 2016 paper found that investors become more optimistic and see the markets as undervalued and holding less risk when their party is in power. (here)Another 2016 paper found Republican-leaning fund managers badly lagged Democratic ones just after Barack Obama was elected and took office, a phenomenon the authors theorize was driven by a tendency to over-weight fears about hyperinflation aired by right-wing media at the time. (here)Looking at the George W. Bush and Obama administrations, the Kansas study found that managers with a political bias tend to over-allocate into politically similar firms more when their party controls the White House. The question about all of this is why fund managers do this. One potential explanation is that political activity serves as a channel through which fund managers get better information about firms whose managers are also in their camp. It is also possible that they are simply more familiar with those firms but don’t have better information.

Aristocracy aside, India Hicks has designs on business NEW YORK India Hicks - goddaughter to the Prince of Wales, granddaughter of Britain’s last viceroy in India and bridesmaid of the late Princess Diana - may have been born into aristocracy, but she has not rested on her laurels.

Traders reduce view on U.S. rate hikes NEW YORK U.S. interest rates futures rose to session highs on Wednesday as traders dialed back their view on the timing of the Federal Reserve's next rate hike following its quarter-percentage point increase last week.

NBA's Chris Paul, other celebrity athletes, invest for a cause NEW YORKGiving back to their communities has always been a challenge for pro athletes who get rich quick because they tend to lose the money even more quickly. But even those who manage to build a substantial amount of wealth have a hard time using it charitably in a way that truly has a long-term effect.

Verizon, AT&T suspend ads from Google over offensive videos


U.S. wireless carriers Verizon Communications Inc (VZ. N) and AT&T Inc (T. N) said on Wednesday they have suspended some digital advertising from Google (GOOGL. O) and YouTube because of concerns that their ads may have run next to offensive content. AT&T said it was removing ads from Google's non-search platforms specifically over concerns that its ads were running next to extremist videos. "We are deeply concerned that our ads may have appeared alongside YouTube content promoting terrorism and hate," the company said in a statement.

In a more sweeping move, Verizon said it has suspended all digital advertising outside of spots that show up in searches after it was notified that ads were appearing on "non-sanctioned websites."

"We are casting a wide net," a company spokeswoman wrote in an email. "We are working with all of our digital advertising partners to understand the weak links so we can prevent this from happening in the future." Google declined to comment on individual customers but said it has begun a review of its advertising policies.

Google allows users to share their locations in mapping app Alphabet Inc's Google announced on Wednesday that it will revamp its popular maps app to allow users to share their locations, in order to boost engagement on a product of increasing strategic importance to the search giant.

Mobileye deal to fuel investment in late-stage Israeli start-ups TEL AVIV Intel's $15.3 billion acquisition of Mobileye has catapulted Israeli hi-tech into the global league, and is likely to stimulate investment in the sector's other late-stage startups, where funds are most needed.

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